How to analyse cybersecurity companies?

Hi there. For myself, i dont really understand cybersecurity. That is out of my circle of competence. But i still trying my best to understand more about cybersecurity industry because nowadays companies are going into cloud space so cybersecurity is a mustnto protect our data and privacy.

U can first filter out what are those companies that are in cyber security industry. Look at their financial and choose the best one to research.

How to determine it is the good company. First of all read their investor presentation slides and earning calls. See what is their dollar retention rate. Look for the ones with the highest retention rate and highest gross margin ones. Most of this companies would be having negative cashflow because they are investing heavily back into their business. But with 50 - 60% gross margin, they can easily turn to profitable company once they stop the investment.

Also you can do some scuttlebut by asking around maybe friends in different industry to see their company subscribed to which company.

Some good ones that came across my mind would be Zscaler and palo alto. You can start with this 2!

All in all, cyber security is worth your time to do in depth research due to the secular trends going forward.

Well if you are in the IT field, you would be able to understand it well. But if not, honestly it's tough. You would have to google a lot of IT jargons (cloud-based, DoS, DDoS, SSL, WAN etc etc..) and even that, it will take a while to visually know how it works.

However, indicators wise, it also depends on what kind of cybersecurity companies we are talking about. Do they just sell the product to consumers, or do they charge a monthly subscription fee? That way you know if revenue is recurring or one-time. Also, how many clients are there and what are the retention rate (i.e how sticky does their client stay with them)?

All in all, cybersecurity is definitely more prevalent nowadays, but at the same time there are a lot of competitors, so you need to know which one has an edge over another. Try taking a look at Zscaler! Pretty amazing cloud cybersecurity!